Until 1995, a Quebec garbage collection company ("EBI") employed its garbage collectors and drivers. It then encouraged most of them to each become the sole shareholder and director of a newly incorporated Quebec company with nominal capitalization, so that EBI entered into contracts with each company for the provision of the services of the individuals which previously had been provided directly. These arrangements were terminated after CRA reassessed.
After stating (at paras. 59-60, TaxInterpretation translation) that "under Quebec civil law, the existence of a relationship of subordination is essential to finding a contract of service," and that "there is subordination if the payer has the ability to determine how the work is executed," Favreau J noted (at para. 62) that the Wiebe common law tests can be used in the Quebec context as they are non-exhaustive indicators of control.
Here, the individual companies carried on personal services businesses, so that the deduction of various expenses was properly denied. EBI exercised the same daily control of the individuals' activities after the change as before (and subsequently, after the new arrangements were terminated) through detailed daily reporting, detailed monitoring by its foremen and strict controls on how its trucks (which were owned by EBI) were utilized and parked – as well as the individual corporations themselves being administered by EBI's accountants for a fixed fee and having the same address as EBI. (The identity of the tasks performed before ad after also showed "integration.") There was minimal prospect for gain or loss (with the net income of the individual companies essentially the same as the employees' income previously) and with a prohibition against using EBI trucks for another company.